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| The Tax Publishers2019 TaxPub(DT) 4323 (Bom-HC) INCOME TAX ACT, 1961
Section 37(1)
Since assessee could not complete the project and abandoned the same, Tribunal, however, noted that assessee was trying to set up a new foundry but the unit was in the nature of expansion of existing business, therefore, the expenditure was correctly allowed by Tribunal as business expenditure.
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Business expenditure - Disallowance of expenses related to setting up of a new foundry as revenue expenditure - Allowability -
Issue arose for consideration was that whether ITAT was right in directing to treat the expenses related to setting up of a new foundry as revenue expenditure without appreciating the fact that expenditure was related to the setting up of a new foundry, activity of which would be different from the activity of assessee and hence, could not be said to be incurred wholly and exclusively for the purpose of business. Held: As assessee could not complete the project and abandoned the same, the Revenue's objection to such expenditure was allowed. Tribunal, however, on facts on the case noted that assessee was trying to set up a new foundry but the unit was in the nature of expansion of existing business. That being the position, the expenditure was correctly allowed by Tribunal.
REFERRED : CIT v. M/s. Mahindra & Mahindra Ltd. [Income Tax Appeal No. 901 of 2011, dt. 15-4-2014] and CIT v. M/s. Mahindra & Mahindra Ltd. [INCOME TAX APPEAL NO. 997 OF 2011, dt. 15-4-2014]
FAVOUR : In assessee's favour
A.Y. :
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